The FCA’s DP24/2 examines the current UK transaction reporting regime, aiming to improve data quality, reduce reporting burdens, and align the framework with modern market practices. The paper identifies potential areas of improvement and seeks stakeholder feedback.

Overview of Key Proposals

  1. Improving data quality
  • Enhanced validation processes to detect and prevent market abuse.
  • Revising the data fields to ensure accuracy and relevance.
  • Introducing clear reporting guidelines for unique scenarios, such as OTC derivatives.
  1. Reducing reporting burdens
  • Simplifying the scope and frequency of reporting requirements.
  • Harmonising UK requirements with international reporting standards.
  • Exploring new reporting technologies, including considering the adoption of JSON, to improve efficiency and data quality.
  1. Refining the scope of reportable instruments
  • Revisiting the criteria for identifying reportable financial instruments, especially OTC derivatives.
  • Considering the adoption of Unique Product Identifiers (UPIs) and modified ISINs to streamline derivative reporting.
  1. Adding new reporting fields

Proposed fields

    • Digital Token Identifiers (DTIs) for tokenised securities.
    • Fields for client categories and complex trade prices.
    • Direct Electronic Access (DEA) Indicator: A new field to identify transactions executed using direct electronic access. Flagging transactions as ‘TRUE’ or ‘FALSE’ could simplify monitoring and improve oversight of DEA activity.
  1. Indicator fields
  • Reviewing the continued use of fields such as short selling and commodity derivative indicators, which may no longer provide value.

Impact on FX Trades

The paper discusses challenges related to FX derivatives reporting, including:

  • consistency in reporting notional currencies and price fields;
  • addressing discrepancies in how FX transactions are quoted and booked in internal systems versus reported to regulators; and
  • exploring solutions to align reporting with market practices while maintaining regulatory oversight.

Impact on UK Trading Venues

  1. Reporting obligations for trading venues
  • Clarifying the scope of Article 26(5) obligations for venues to report transactions executed through their systems, especially for non-UK firms.
  • Considering whether negotiated transactions should be included in reporting requirements.
  1. Instrument reference data
  • Streamlining reporting frequency for trading venues, potentially requiring reference data submission only for initial reportable events and subsequent changes.
  • Expanding the obligation to submit data from the date of admission requests.
  1. Proposed changes to reporting fields
  • Refining the requirements for fields such as Trading Venue Transaction Identification Codes (TVTICs) to improve matching and consistency.
  • Exploring further guidance on how trading venues should handle intraday instruments and bespoke instruments traded on Organised Trading Facilities (OTFs).

Reporting Transactions by UK Branches of Third Country Firms

DP24/2 addresses the complexity of determining reporting responsibilities for transactions involving UK branches of third-country firms. Key considerations include:

  • clarification of reporting obligations: The paper proposes removing the responsibility for UK branches of third-country firms to report transactions executed on UK trading venues. Instead, trading venues would report all transactions involving these firms, simplifying the reporting framework;
  • reduction of duplication and errors: The proposal aims to prevent duplicate reporting and ensure that transactions are not missed due to ambiguity over whether the branch or the venue is responsible for reporting and
  • broader implications for market oversight: While this change would increase the volume of reports submitted by trading venues, it is expected to reduce the administrative burden on UK branches of third-country firms and improve data consistency.

Next Steps

Responses to DP24/2 will shape the FCA’s consultative position, culminating in a formal consultation paper. The final rules, once developed, will be implemented into the FCA Handbook, replacing the existing RTS 22 requirements.

Get Involved

Stakeholders are invited to provide comments by 14 February 2025. Responses can be submitted via email to dp24-2@fca.org.uk. CG Regulatory Solutions offers expertise for firms seeking tailored guidance to navigate these regulatory developments. Contact us for more information.

Reference

Financial Conduct Authority (FCA), Discussion Paper 24/2: Improving the UK Transaction Reporting Regime, November 2024. Available here.